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How Does Refinancing a Mortgage Work?

Refinancing a mortgage involves taking out a whole new loan, so you can pay off your original mortgage loan. There are many different reasons as to why a person may want or need to refinance their mortgage.

However, in most cases, homeowners do it to take advantage of the lower market interest rates, either to cash out a portion of their equity, or to reduce their monthly payment with a longer repayment term.

So How Exactly Does Refinancing a Mortgage in the UK Work?

The whole process of refinancing a mortgage is very similar to the process of getting a mortgage in the first place. This usually begins with you shopping around and comparing the different interest rates from mortgage providers. After you have done that, you can then take the one that suits you the most, and you can compare that with the pre-existing terms of your loan.

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Resetting the Payment Terms

Refinancing might mean that you are resetting the repayment clock. For example, if you have already made five years’ worth of payments on your current 30-year mortgage, then that will mean that there are twenty-five years left on that current loan.

So, if you were to refinance and you get another thirty-year loan, then you will have to start from the very beginning again. That could do more harm than good and it is definitely something that you need to keep an eye out for when beginning this process.

Once you start the refinancing process, it is very important that you stay aware of the closing costs. They can be between 2 percent and 5 percent of the amount that you refinance.

This is an incredibly important thing that you need to consider when you refinance. So, it may not make financial sense for you to refinance but it all depends how high you feel the costs are.

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Refinancing a Mortgage – the Benefits

There are many reasons as to why a person would refinance and along with that are pros and cons, the good and the bad. Let us look at the pros (advantages) that come with refinancing.

  • The main one being that it could possibly lower your interest rate
  • It is possible that it can lower your mortgage payment as a whole
  • It can decrease the term of your loan, which in turn could allow you to pay it off much sooner than expected, allowing you to live mortgage free for longer
  • You can tap into your home’s equity and take out cash
  • You can cancel mortgage insurance premiums
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The Downside of Refinancing a Mortgage

Just like there are many pros that come along with refinancing a mortgage, there are also considerations that should also be considered.

  • There can be some very expensive closing costs
  • You could potentially face a longer loan term than before, which will only add to your costs
  • There could be a lot less equity in your home if you take cash out
  • The whole process of refinancing can take between fifteen days and 45 days, or possibly even longer
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Prime Financial Solutions and Mortgages Ltd

If you would like to refinance a mortgage get in touch with us we can help – telephone 01942 665 436:

FOR THE BEST WAYS TO REFINANCE YOUR UK MORTGAGE TALK TO US

There are many obstacles to overcome when it comes to finding not only the right way to refinance but the right place. Prime sources the whole of the UK to get you great solutions. When you choose Prime, you’re choosing a UK broker that works extremely hard on your behalf to get you great choices in what for you, can be a very complex, frustrating and time consuming process.

At Prime we have an exceptional FCA approved team of refinancing, life insurance & mortgage specialists who work passionately for you. Refinancing quotes are free and we provide an excellent one to one service all tailor made to your own individual needs and circumstances. Prime provides a hassle free service – we do all of the heavy lifting so you don’t have to.

Prime is proud of the reputation it has built over many years, and this is largely reflected through the positive reviews we receive on a regular basis from customers in Wigan, Greater Manchester and across UK, in person, on Trust Pilot and Google online.

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Is there something we have missed out – a question you would like to ask? Our dedicated team of experts will answer any and all of your questions – contact us to find out more.

Refinancing is a very important step for many in the UK, and we also provide other services so you can feel assured we are always here to help you. You can find out more about us and what we do here and if you need help with anything else, Prime will help you. Click here to Get a Life Insurance Quote or use our quick contact form to get in touch. Our friendly dedicated team is available by telephone 01942 665 436 during office hours.

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